Posts Tagged ‘Business Planning’


Lease vs. Buy: Which is Right for Your Small Business?

3-4 lease or buy equipment smallCongratulations! You’ve secured an office space and are ready to begin setting up shop in your new small business location. But before you can start welcoming clients and customers through the door, you need to fill your office with furniture and equipment. This component of business ownership can be an expensive part of the process. One way to keep costs low is to look at leasing equipment rather than buying it outright. Which approach is best for your small business? Let’s look at the advantages of leasing and buying.

Advantages of Leasing

  • Better Cash Position: There are several advantages to this strategy, the most important being an improvement in your cash position. A loan to purchase equipment requires at least 25 percent of the loan in cash up front. Other than a refundable security deposit, equipment leases require no money down. This saves you considerable cash that you would be spending if you purchased it instead.
  • Easier to Secure Funding: It’s also easier to secure financing for leasing over buying. Leasing companies typically want a year or less of business credit history before approving a lease of furniture or office equipment. Capital equipment loans, on the other hand, require three years of financial history.
  • You Won’t Be Stuck with Obsolete Equipment: Another advantage leasing offers is the ability to change out equipment every one to two years. This is important because, seeing how quickly technology changes, it’s important not to be stuck with an antiquated machine when something faster and cheaper is available. Always see if you can negotiate a “modern equipment substitution clause” that lets you trade up for the latest technology.
  • Leasing Helps the Bottom Line: Your accountant may be able to re-categorize some assets on your balance sheet if you lease equipment, which can make your business’ debt-to-equity ratio look much healthier, as will your earnings-to-fixed-assets ratio.

Advantages of Buying

  • Less Expensive Overall: Over the long-term, leasing equipment is typically always more expensive than buying it outright. The reason is because you are paying for the item and monthly interest on the lease. So while you may be expending less cash each month, you are paying more over the course of the multi-year lease loan.
  • Ownership: With a lease, you are paying for items that you are only borrowing from someone else. At the conclusion of the payment cycle, you are not left with anything you own and are forced to start anew by expending more cash. Buying, on the other hand, provides you with an asset you can sell.
  • Tax Advantages:  Small businesses often miss out on the substantial savings that can be made by claiming business expenses. The office equipment you purchase for your business is tax-deductible, which can make a significant impact on your expenses and overall income when it comes time to pay taxes.

When furnishing your office with equipment and furniture, it’s best to review your financial plan before making any decision. Always run your numbers first to determine what you can afford and whether it makes more sense to buy or lease items. 


7 Ways To Make Money In Your Sleep

3-2 Make Money While you Sleep smallIf you think about the way your business works – you find clients, pitch your goods, land the sale, deliver the product, build repeat business, and work for referrals – there are loads of challenges entailed in every step.  If you want to generate more income with less effort at every stage, the key is automation.  Finding ways to implement systems and maximize efficiencies helps your business earn an income even when you’re not actively working.

  1. Turn yourself into the product.  Once you’ve established yourself as a credible authority in your field, the logical move is to develop a way to market your expertise.  Whether you sell a book or instructional videos, once you’ve created your product and implemented a marketing plan, the hard work is over.  You collect your money while you’re moving on to the next challenge.
  2. Do fewer things.  The surest recipe for failure is trying to do everything under the sun that could possibly be relevant in your venture.  If you settle on a few key services or products, then you can perfect the systems for producing and delivering your offerings.  Always remember that the riches are often in the niches;  if you can offer customers something unique – and do it efficiently – then you’re a standout.  You don’t have to be everything to everyone.
  3. Create continuity.  If you can find a way to build a recurring service plan for clients, you’re maximizing efficiency in two main ways:  you’re creating predictable expenses for your clients, and you’re ensuring continued revenue for your company.  Recurring billing – the subscription model – capitalizes on efficiency both for the client and the service provider.
  4. Sell the system cheap and make money on the refills.  One word:  Keurig.  The dominant entry in the single-cup coffee industry doesn’t actually make that much money on its high quality brewers.  The real bucks are in the coffee refills.  Millions of dollars in revenue are derived from individual sized coffee pods.  Proprietary design is the key to recurring purchases.
  5. Become the middleman.  There’s a reason middlemen exist, and it’s the economy of scale you can find when you consolidate the transportation, sales, and delivery of goods.  Look at Amazon:  they don’t produce the stuff they sell.  They simply attract vendors and find a way to sell, collect money, and deliver products – faster than nearly anyone else in the world.
  6. Become a teacher.  Much like turning yourself into a product, becoming a teacher lets you market your expertise.  Whether you become a part time consultant for other entrepreneurs in your field, or you write a how-to guide for starting your kind of small business, you’ll reap dual benefits from becoming an educational resource:  income from the time you spend consulting or writing, as well as increased visibility for your brand.
  7. Become an investor.  When you started your business, you did it to fill a need you saw in your market.  My advice to entrepreneurs who want to invest is to look at needs (other than the ones you supply) that your existing clients have.  By partnering with other companies who service the same clients, you can find efficiencies and provide an overall better level of service.  It’s a win-win for both entrepreneurs and their clients.

There’s no avoiding the hard work it takes to get a fledgling business off the ground, but once you’ve achieved a measure of success, your most profitable moves will be those that maximize efficiency and generate revenue – even when you’re not actively working.


How to Make More Money without More Customers

2-27 More money from customers smallFable: A man who sold his farm and everything he owned to travel in search of diamonds in a foreign land. After he spent all his money, he lived in poverty for the rest of his life. One day, the successor of the man’s farm was out on the land and found diamonds that reflected all the colors of the rainbow. Morale:  If the man stayed home and dug on his own land, he would have had “acres of diamonds.

Much like the man’s search for diamonds, the secret to increasing profits and growing a business typically already is present inside every company with existing customers. Unfortunately, many small business owners ignore this advice since they are so busy trying to get new customers in the front door that they let existing ones escape out their back door. They focus their energy on scrambling for the next lead, chasing the next prospect, and spend thousands of dollars on marketing to uncover the next big customer. They forget about mining for the “acres of diamonds on their own land”. Remember that every customer that leaves, needs to be replaced by a new one.

Here are ten ways to increase profits by extracting the maximum value from your existing customers.

  1. Sell more. Are the best customers buying all of your company’s products or services? Put together a chart where all your customers are listed on one axis and your products are listed on the other. Place an X where each customer is buying a given product. Use this chart to discover where your holes are. If they already trust your company, they will want to buy more things from you.
  2. Incentivize greater usage. Encourage your customers to use your product or service more often. Offer loyalty programs or bonuses for repeat use to the best customers. This is especially true in an industry where products are commodities or they can be sourced easily. Great examples of this are Amazon Prime and all airline frequent flyer programs.
  3. Communicate Consistently. Use content marketing strategies to send customers useful information like articles and newsletters that are both educational and funny. Keep in touch with your customers at least once a week using multiple mediums so you can be there when they are ready to buy. This can be original advice or links to relevant articles.
  4. Know your customers. Mine the data. Know what, when and how much your customers buy monthly or annually. Invest time and money in knowing exactly how your customers think, what they like, what they dislike, and tailor offers to match. This data can be found in Google analytics, your CRM sytem, your accounting or shopping cart system.
  5. Know your ABCs. Separate your customers into “A”s, “B”s, and “C”s according their life time value to your company. Measure them based on purchases, referrals, and brand recognition. Come up with a strategy to move Cs to Bs and Bs to As.  
  6. Become the “Go-To”. Leverage your strategic alliances to connect your customers to other resources that can fill needs and desires that are beyond the scope of your business. Your customers will view you as their “go-to-resource” which will give you an opportunity to go from being vendor to a partner.
  7. Show thanks frequently. Build customer loyalty by rewarding your customers beyond financial incentives. Call them to express your appreciation or send a handwritten card. Post a thanks on their social media page or feed.
  8. Make an exclusive club. In addition to recognition, people love to feel a sense of belonging. Create a membership group for your customers with special offers and privileges for members. Costco and Sam’s club does this very effectively.
  9. Sell a subscription. Renewable products are ones that customers use up and will need to buy again. Harry’s (razor blades) and Birchbox (cosmetics) are successful examples. This will ensure that the company always has customers at the beginning of every month. According to John Warrillow, author of “The Automatic Customer: Creating a Subscription Business in Any Industry”, any business can be a subscription based company if they think big enough. He suggests starting by asking yourself, “what could I offer to them that is 10X bigger than I do today”.
  10. Just ask. Simply ask your customers what they want. They may not be always be able to tell you directly, but it will begin a dialogue which will get to what they really desire. This can be done easily through two to three question surveys using Survey Gizmo.

Where will you begin in mining your customers?


Why Entrepreneurs Should Fake It Until They Make It

Young Businessman Using a Digital TabletWith the increasing popularity of business-casual attire, a great business suit is not as effective as it used to be in creating an impression of success. But projecting a successful appearance is still important when you want your business to attract customers and clients, as it creates a feeling of higher comfort and less risk in your potential customers’ minds.  I mean, who doesn’t want to be associated with a successful entrepreneur?

Even if your business doesn’t yet have mountains of cash, you can appear prosperous without breaking your bank. Here are a few ways to economically enhance your professional image without misrepresenting your business or yourself.

A Successful First Impression

After a failed attempt at an acting career, Beanie Babies founder Ty Warner became a billionaire by selling stuffed animals. According to legend, he rented a Rolls Royce to drive to sales calls to project a wildly successful image. While we don’t recommend following Ty Warner’s cues on all of his faking- (Warner is still trying to stay out of jail after admitting to tax fraud), you can borrow his moxy for creating a successful impression.

Creating a successful impression extends not only to your car, but also to your business office. Your business may involve two people working in your basement, but unless your basement resembles the Taj Mahal, you will not impress prospective clients by holding meetings there. Until you have a high-profile address where you can meet with clients, a flexible office solution, such as the choices offered by companies like Regus, can enhance your office image while providing services that you need.

You may decide that a virtual office gives you a prestigious address (complete with a phone number and receptionist support) without having to make a big financial commitment.

One extra word of advice, though: make sure that your impression matches your target customers. If you want to attract eco-friendly customers, don’t show up in a Humvee or if you are attracting clients in the pet care industry, showing up in your fur coat is probably counterproductive.

Consider a Website Upgrade

Clients will not flock to your door if your website has a similar production value to a late-night auto insurance commercial. Your website needs to convey a professional image with content that makes search engines place your company toward the top of a search list.

Only you can decide how much help your website needs, but you do not have to spend a fortune to head in the right direction toward a slick website. You can use templates, like those that coordinate with WordPress, to look modern and professional.  And of course, don’t forget to make your website mobile-friendly, as more and more customers are accessing information from their smartphones.

Do your homework by talking to a number of web development firms. Look for those that use words like “SEO,” “interface design” and “regular maintenance.” If you hear the word “cool” too often, head for the hills.

Establish Credibility with a Quick PR Blitz

One way to boost your profile is to be featured in the press.  Having appeared in print or online publications, television shows and/or on the radio can make you seem bigger than you are.

Leverage any relationships that you have to get some PR placements.  If you don’t have connections, one cost-efficient strategy is to hire a “pay-to-play” PR firm, which may cost a bit more for a placement, but guarantees their services, instead of you rolling the dice on a monthly retainer fee.

I did precisely this when I was starting out. I hired a firm that put me on a radio tour.  Within 45 days’ time, I had between 20 and 30 radio appearances that I had made.  Since I only listed the appearances (not the dates of) on my website’s “press” page, that list looked like I had been a go-to press expert for years.

To get the most out of your PR, highlight where you have been featured on your website, in your marketing materials and even in your email signature line.

Work Pro Bono for the Right Clients

Working for free will not generally add to your success. But there’s an exception to this rule: high-profile clients. When you add a big name to your client list, your work is repaid when other big-name clients buy your goods or services. They see your business as a legitimate industry player.

As a bonus, high-profile clients do not have to remain pro bono forever. Do a great job for them the first time, get to know their key decision makers, and you can develop a valuable business relationship in the future.

So, before you hit the big time, act like you are already there and you will be there in no time at all!


Improve Your Company’s Customer Experience – By Thinking Like Steve Jobs

“You‘ve got to start with the customer experience and work back toward the technology – not the other way around.”

2-26 customer experience smallThis is a message that Steve Jobs would repeat, over and over and over. It means that the technology sold by Apple, or used by Apple in support of the customer experience, doesn't have to be invented at Apple. And the technology Apple has lying around at its disposal doesn’t have to end up being used.

A company like Apple, and perhaps yours, suffers from almost a surplus of technologically adept employees.  But Apple, when it is at its best (which isn't always, unfortunately), refuses to let technological capability drive the customer experience.  Siri, to pick just one small example, wasn’t developed at Apple.  It was envisioned at Apple after which Apple went on a hunt to see how their vision could be brought to life.

The Apple Store, to pick another example, was envisioned as the best customer experience anywhere (not just the best electronics retailing experience).  So Apple benchmarked its customer service not against Best Buy, not against Radio Shack.

Instead, in preparing to open the first Apple Store, Apple chose to benchmark a company in an entirely different industry, hospitality: The Ritz-Carlton Hotel Company. From their study of the Ritz-Carlton, they developed the Genius Bar (a repurposing of the concierge station in the lobby of hotel: just like concierges at the Ritz, the Apple Genius Bar is staffed with empathetic, knowledgeable people who will, so to speak, help you get to where you want to go), as well as their very specific approach to greeting customers as they enter the Apple Store.

Apply this to your own business situation

Obviously, Apple is a unique company, with a unique historical and financial position.  But there is a practical entrepreneurial lesson here: Think about how different your customer experience could be if you channeled Steve Jobs’ "first things first" attitude and made it integral to your customer experience approach.  A couple examples that might apply to your business:

  • What if you didn’t force customers to suffer through your use of the (probably obsolete) CRM technology you have in house, but instead reconsidered what it would take to actually create the experience you want to provide for customers?
  • What if you didn’t surrender responsibility for your social media interactions with customers to those in your company who are most technically adept at social media, but instead kept it firmly under the reins of the people who are truly your long-time customer service experts, with, of course, the helpful support of the above-mentioned technocrats?
  • What if you picked up the doggone phone and called your customer (telephones are fantastic technology, albeit often poorly used by business) when that's the most direct way to resolve a customer issue, rather than thinking you need to sit back and hopelessly watch a simple customer issue escalate via twitter, email, and live chat?

How to Choose a Bank for Your Small Business

2-25 Choosing a bank smallOne of the first things you need to do on your path to becoming your own boss is to open a business checking account. Now, you might think it’s best to keep your business account with the same bank where you have your personal accounts, but it’s better not to. Should your business fail and you have both business and personal accounts at the same bank, you risk losing everything because the bank can seize your personal assets to satisfy your business debt.

What You Need in a Bank

Your business needs a banking relationship not just a bank. It isn’t just a place to put your money. It’s a place you have a relationship with a partner that should be interested in helping your business succeed. Not every bank has great personal relationships with its business clientele, so keep that in mind when beginning your search.

While you might only start out opening a business checking account, there may come a day when you want to apply for a small business loan through your bank, so make sure the banks you consider offer a variety of small business services that can support your company as you grow.

Where to Start Looking

Ignore billboards, online ads, and commercials when choosing a bank. You’re better off asking other entrepreneurs for referrals, since they will know which banks are small business-friendly (not all are).

It’s a good idea to narrow your choices down to three, and then schedule time to sit down with a branch manager from each. These questions can help you gauge which is the best fit for your business’ needs:

  • What percentage of your customers at this branch are small business owners?
  • How fast are checks cleared to my business account (both in- and out-of-state)?
  • Is there a dedicated small business banker on your staff?
  • What kind of customer service do you provide for small business?
  • Are loan decisions made locally?
  • Does the small business banker have any influence over the loan decision process?
  • How many SBA loans did your bank process last year?

The point of these questions is to see how much energy a bank puts into managing and developing its small business clientele. You want to feel like a welcome and cherished customer, especially since you will be trusting this bank with your hard-earned cash!

Also consider what you’re looking for in a bank. Do you need to easily get to it to deposit cash each day (if you operate a restaurant, this is a must)? Would you prefer to be able to access your accounts through a mobile app?

Developing the Relationship Over Time

You may have little need to visit your local branch, especially since many banks allow you to deposit checks with a few clicks on your phone. But make a point to stop in and visit your branch manager or small business banker every few months and update them on what’s happening with your company.

Ask if there’s anything new service-wise with the bank. You might find out they’ve got a new banking program that’s perfect for your needs at the moment. Keeping that dialogue going will help you both find ways to work together for the success of your business.


Nextiva Tuesday Tip: What Customer Service Benchmarks Should Your E-commerce Business Measure?

2-24 e-commerce customer service smallWhat type of customer service benchmarks should your ecommerce business be hitting? The E-Tailing Group’s 17th Annual Mystery Shopping Study has some insights. The survey, conducted at the end of 2014, studied 100 top retail websites for their best practices. When it comes to customer service, these are the benchmarks used and how you can incorporate them in your business:

Self-service information

What type of self-service information is available on your website? How easy is it to find? How comprehensive is it? If there is a lot of information, is it categorized properly or searchable?

Of the 100 retailers surveyed, 83 percent have FAQs on-site. However, only 26 percent offer the ability to search FAQs. Surprisingly, the percentage of sites that list customer service hours of operation dropped from 83 percent in 2013 to 77 percent in 2014. This is the type of basic information every business should include on its website.

Online shopping cart

How easy is your shopping cart to use and edit? Is make-or-break information such as shipping costs and taxes presented before the end of the process? Can the customer save key information (shipping addresses, etc.) securely?

Top-rated retailers enable customers to checkout with five or fewer total steps/screens to fill out. Nearly all of the retailers (98 percent) now offer the ability to pre-populate the customer profile in the shopping cart so shoppers can check out faster. In addition, half have enabled one-click checkout.

As more consumers are browsing and buying on different devices, the “universal” shopping cart (which can be accessed from any device) is now offered by 82 percent of the top retailers, up from 73 percent in 2013. Another desirable feature: 65 percent of top retailers allow shoppers to move items from the shopping cart to a “wish list” or “buy later” list, up from 54 percent in 2013.

Days to receive ordered products

How long does it take to receive orders? What types of shipping options do you offer and for what prices?

Top retailers in the survey average delivery in 3.42 days, a slight improvement over 3.8 days in 2013.

Order confirmations

How quickly do you provide order confirmations? What information do they contain? How easy is it to adjust or cancel an order after receiving confirmation?

Some 81 percent of e-tailers include customer service phone numbers in their order confirmation emails, up from 77 percent in 2013.

Quality of and response times for email/call center customer service queries

How quickly are emails/calls answered? What are average hold times at the call center? How many times is the average customer placed on hold or transferred during a customer service call?

The top retailers not only answer email questions within 24 hours, but also include a personalized salutation and content.

Return policy

How easy are returns? If you have a brick-and-mortar store as well as an ecommerce site, can customers return online purchases in-store? Is there a charge for returns or are shipping costs covered?

Two-thirds of retailers now have one, uniform return policy for both online and offline purchases. Retailers are also adding convenience to the online return process by providing prepaid return shipping labels—64 percent of sites provide these, up from 59 percent in 2013.

By monitoring these benchmarks and continually seeking to improve upon them, your business can reach new levels of customer service success.


10 Smart People You Need to Meet

2-19 Inspiring People smallI meet a lot of smart business people every day. This happens in person, over the phone, through email exchanges or on my radio show. Here are ten people that blew me away with their brilliance in 2014 (in alphabetical order).

Dorie Clark: One look at Dorie and you know this branding expert is pure genius. My thoughts are not even in the same zip code as hers. Maybe it’s all the think tanks and academic universities she speaks at all over the world. The smartest thing I heard her say: To achieve in today’s competitive job market, it’s almost certain that at some point you’ll need to reinvent yourself professionally.”

Barbara Corcoran: She turned a real estate empire and being “a shark” into sincerely helping small business owners. I remember when I was on TV with her. She has the fastest wit around! The smartest thing I heard her say: “Taking chances almost always makes for happy endings”.

Nir Eyal: This guy knows why people get hooked on a product or service. In one of my favorite books of the year, “Hooked” he shows exactly how to do it. The smartest thing I heard him say: “Companies who form strong user habits enjoy big benefits to their bottom line.”

Tomas Gorny: A former immigrant from Poland, Tomas is huge success story. He founded the company IPOWER that became the fastest growing website hosting provider in the United States. Now CEO of UnitedWeb, he is making his mark helping small business owners. The smartest thing I heard him say: He tells me that his competitive advantage is that people don’t think he is smart since he speaks with an accent but he says, “I don’t think in an accent.”

Sally Hogshead: She is a master at observation and what makes people tick. Her books are well researched and her ideas actionable. The smartest thing I heard her say: “Once you know what makes you valuable to others, you’re more authentic and confident, and more likely to make a brilliant impression.”

Tom Hopkins: This guy started breaking sales records before most of us were out of high school. He has taught how to sell to millions all over the world. When I was in Phoenix, Tom welcomed me into his home.  The smartest thing I heard him say: “Do what you fear the most and you control fear.”

Les McKeown: This guy is always the smartest person in the room. We all want predictable success and Les explains it so we can achieve it. The smartest thing I heard him say: “Heroic acts are powerful, but they are not scalable.”

John Sculley: At age 75, former president of Apple and Pepisco, John is still changing the world. He is called a global storyteller for the digital revolution. The smartest thing I heard him say: “The future belongs to those who see the possibilities before they become obvious.”

Pam Slim: She shows how to get ahead in a world filled with economic instability, rapid change, and 24/7 work. The smartest thing I heard her say: “The quality of your life, and business, is directly related to the quality of your stories. Tell them well."

Paul G. Stoltz: We all know it takes hard work to succeed, but Paul told me the science behind having resliency. The smartest thing I heard him say: “Over time, either adversity consumes you, or you have to consume it. That’s why resilience is so essential to grit.”

Which smart people did you meet last year?


4 Tips to Achieve Your Personal Finance Goals Before Starting a Business

2-18 personal finance smallBefore you can commit to funding your new business, you need to take care of your own personal financial goals. You need to move into starting a business with a strong financial record, as well as money in the bank. This makes it easy for you to qualify for a small business loan, if you need one down the road, and keeps you from stressing over not having the funds to cover your expenses while you’re waiting to turn a profit.

1. Eliminate Personal Debt

Don’t start your business weighted under credit card debt. The average American household has about $15,000 in credit card debt, a staggering number if you want to bootstrap your own business.

Having zero debt frees up your credit capacity, so work on zeroing out credit card balances and paying off your car so that you can focus only on basic expenses such as your mortgage, phone, gas and electric, cable, and food. The leaner you run, the more you’ll have to put into your business.

2. Improve Your Credit Score

There will come a time in the all-too-near future when you need credit, be it in the form of a store credit or just credit from vendors you work with regularly. If your credit score isn’t good — say, under 750 — you might not get that credit or pay a much higher interest rate. Since your business will have no credit history to begin with, they’ll look at your personal credit score, so you need to focus on cleaning up your number if it’s less than ideal.

Don’t know your credit score? You’re entitled to one free credit report a year from one of the big three indexes. Get your copy here and start your plan to improving your score.

3. Set Aside 12-24 Months of Household Expenses

You will not make a profit instantly, so you’ll need to keep paying those household expenses in the meantime (another reason to lower your debt: you’ll have less to pay in expenses!). Having 12-24 months’ worth of money to cover expenses may sound drastic, but it’s better to have more than enough than to find yourself unable to pay bills in 6 months.

If you don’t currently operate with a budget for your household, now’s the time to create one. If, in the process, you find places you can reduce your expenses, such as cutting the cable cord, go for it.

Remember: if you’re quitting a job with health benefits, you’ll also need to factor in the cost for your health insurance. It will be significantly higher than your employer-sponsored plan.

4. Have Your First Year of Working Capital

In addition to your personal expenses, you’ll need to be able to cover your business costs until your business gets going. A year’s worth of capital should be sufficient. Again, start with a budget (even if you’re using guesstimates at this point) so you know what expenses you need to plan for.

Since you’ll have a pretty sizeable chunk of money in savings for your personal and business needs, consider opening a money market account or high-yield savings account so that you can earn a little interest while it’s sitting there.

If you get your money straight before starting your business, that will be one less things stressing you as you start your small business.




 
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